Last-look guidance felt as market prepares for FX code deadline

The number of price updates is increasing as the hold time for quotes decreases.

This is partly the result of firms demonstrating their compliance with new last-look guidance, according to Kurt vom Scheidt, global head of FX at Saxo Bank – though faster market data also push the market in that direction.

“Firms are keen to adhere to the code’s guidance on last look, especially when that is defined to be an extra hold time for an order accept/reject decision beyond an immediate price/risk check,” says Vom Scheidt.

“Allowing the immediate check supports tighter spreads in a fragmented, decentralized global FX market, which can be beneficial when liquidity is appropriately managed and accessed.”

He adds: “Liquidity distributors and consumers are now working through their relationships, inclusive of differing potential technology constraints, to find the right balance to achieve minimal market impact of execution against a price stack where shortened hold time is a normalized aggregation factor.”

The Global Foreign Exchange Committee has indicated it will establish three new working groups at its next meeting in South Africa in the second quarter of 2018 – expected to address last look, cover and deal trading and disclosure.